Maybe you’re stock trading or share for quite a while and so are trying to find new opportunities.
Have you contemplated index options? They are not simply for institutional investors anymore.
The truth is, many retail equity options traders could make an easy transition to Mini S&P 500 and Mini Russell 2000 Index options. Like they may be smaller versions with the equivalent standard index options contracts. At 1/10th the size of the standard contracts, Mini Index options allow retail traders to get broad market exposure and execute trading strategies with less capital.
5 Reasons to Trade Index Options
Index options will help traders diversify a portfolio and gain broad exposure with (in most cases) one trade. In comparison with single stocks, index options lessen the odds of experiencing a space move which help narrow the target to advertise risk rather than individual company risks.
Index options generally have lower volatility than choices on individual stocks. Volatility around earnings reports, mergers, as well as other news events can have a significant impact on commodity prices. However with index options, those volatile moves usually lessen.
Index option is European style, meaning they can not be exercised before expiration. Equity options, conversely, may be exercised anytime. Stock options settle to shares from the underlying stock, while index options settle to cash.
Index options typically entitled to the 60% long-term, 40% short-term capital gains tax treatment.*
Index options usually have narrower bid/ask spreads than single-stock options because of greater liquidity.
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